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'Political platitudes' or open-mindedness?

Andrew Podger

In slamming Treasury's Well-being Framework, the hyperbole in Professor Jonathan Pincus's recent paper is obvious. But the rich and balanced debate that took place when the paper was presented was sadly missing from J. R. Nethercote's report last month.

Nethercote's article did not even mention the Castles symposium where Pincus's paper was presented in late November, along with the main paper co-written by Treasury's Dr David Gruen and Duncan Spender that Nethercote quotes. They were just two of more than a dozen substantial papers presented to the symposium, hosted by the Academy of Social Sciences in Australia and the Crawford School of Public Policy, on ''economic growth and well-being''. A selection of papers written by the late Ian Castles were also considered by the invited group of academic and practitioner experts. A book from the symposium will be published by ANU ePress in mid-2013.

Pincus says Treasury's framework (he and Nethercote prefer the snide ''TWOTAP - the well-being of the Australian people'') is ''almost completely useless'', ''can justify Treasury's advocacy of almost any plausible policy'', is ''a charter for those in Treasury with 'bees in their bonnets' '', and is ''cant (that is, 'a pious, sanctimonious platitude') and, in particular, political cant''. He and Nethercote evidently want Treasury to return to (as Nethercote puts it) being ''part of the firmament marked by stability and constancy'', avoiding any ''zeal or enthusiasm'', remaining ''dour'' and, presumably, focussed on its devil's advocate role opposing proposals for government spending or other intervention and concentrating on economic growth.

While some at the Castles symposium shared Pincus's concerns that the well-being framework might dilute Treasury's role in promoting fiscal discipline and economic orthodoxy, others welcomed Treasury taking a broader view, believing this enhanced Treasury's credibility with ministers and their capacity to engage with other agencies, and was entirely consistent with rigorous analysis of public policy that must address such issues as distribution as well as economic growth. They certainly did not favour a move back to Treasury's famous (infamous?) style of the late 1970s and early 1980s.

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The context of this discussion was the symposium's examination of the long history of attempts to measure well-being, from the 19th century classical economists' clarification that well-being entails much more than economic growth, to the work in Australia and overseas over the past 50 years to go beyond gross domestic product as an indicator of living standards - the most recent Australian contributions being the Bureau of Statistics' ''Measures of Australia's Progress'' and Treasury's framework. The most recent international efforts - including, in particular, by the Organisation for Economic Cooperation and Development but also by the World Bank and the International Monetary Fund - have been heavily influenced by the 2009 report by professors Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi on the measurement of economic performance and social progress, which was commissioned by then French president Nicolas Sarkozy. All these efforts reflect the fact that GDP omits many factors that contribute to well-being, such as recreation, voluntary work and family activities, and includes some that diminish well-being, such as transaction costs and other activities that take up time and money people might prefer to direct elsewhere.

The workshop was held in honour of Ian Castles, who contributed so much to consideration of these issues over 40 years, including in the Treasury, the Department of the Prime Minister and Cabinet, as secretary of the Finance Department and as the Australian statistician. In Treasury, he led a small team that produced the 1973 Treasury paper No 2, Economic Growth: Is it Worth Having?, which has a whole chapter on the relationships between economic growth and national ''well-being''.

Treasury's Well-being Framework is not, therefore, some trendy new idea, but has considerable antecedents. This is not to suggest it is beyond criticism, but perhaps a little more balance is needed than that made by Pincus.

The Pincus paper argues that, without ranking the framework's five dimensions of well-being (opportunities, distribution, sustainability, risk and complexity) and identifying weights, it could not be applied consistently or transparently. Gruen and Spender argue it is not the role of Treasury to set such weights, as that is the responsibility of the elected government, but that the framework can be used to help ministers make necessary trade-offs. Most at the symposium seemed to agree, disputing the Pincus argument that the framework politicised Treasury; indeed, it would only do so if Treasury did what Pincus called for.

Stronger elements of Pincus's criticisms concern the lack of clarification of how the framework relates to economic theory and analysis of the role of government in a market economy, and the failure to date (at least in the public arena) to review how the framework has been applied in practice and to identify its proven strengths and weaknesses. Why did Treasury apply these five dimensions of well-being? What is the government's role vis-à-vis that of the market, and of individuals and families, in addressing each of these dimensions? How are the other tools of analysis, which Gruen and Spender say Treasury uses, linked to the framework? Gruen and Spender mention how the framework was influenced by the work of Amartya Sen, particularly in emphasising opportunities and seeing well-being as primarily about people's freedom to live the life they want, but there is little explanation of the derivation and meaning of each framework dimension. Participants in the symposium were particularly unsure of how ''complexity'' affects well-being and whether the framework implies a role for government in limiting complexity (other than in its own activities, such as tax and social security law).

Discussion at the Castles symposium was far more balanced than the onslaught conveyed by Nethercote reflecting the language of the Pincus paper. In sharp contrast to Pincus's perspective, some participants expressed concern that the wider definitions of well-being that are being adopted around the world are still too narrow: that they focus on individuals and omit concerns about the negative effects of Western development on community and society (such as loneliness and pessimism about government and society). Others were more positive about current efforts to broaden understanding of well-being, including the foreshadowed work by the ABS to add governance and community well-being to its ''Measures of Australia's Progress'' initiative.

There was also substantial discussion about the distribution of income and well-being, and the circumstances in which inequality is appropriate and those where it represents serious problems for public policy to address.

There was an important session on how the well-being of the current population should be balanced against the well-being of future generations, reflecting on the work of Castles and others on climate change. What discount rate should be applied to future benefits from reduced carbon emissions arising from costs imposed today? To what extent is this an ethical as well as an economic and scientific question?

While there was no attempt to seek consensus, there seemed to be wide support among the experts at this symposium for the view that economic growth should not be constrained, so long as growth is defined not just in terms of GDP but as ''expanding opportunities'' (the term used in the 1973 Treasury paper). Indeed, GDP growth should never be the target, though it is generally (but not always) true that measures which enhance well-being and opportunities do result in GDP growth (and growth in GDP per capita).

The purpose of the symposium was not only to produce a book of quality papers on the subject of economic growth and well-being, but to provide a constructive contribution from relevant experts to the work being done by Treasury, the ABS and others on measuring well-being and on public policies to promote well-being. The Pincus paper certainly provoked an important debate, but the wider range of papers and discussion at the symposium formed a more balanced consideration of the issues and made a more constructive contribution.

Andrew Podger is a professor of public policy at the Australian National University and a fellow of the Academy of Social Sciences in Australia. He is a former public service commissioner and a former departmental secretary.